While conjuring “an urgent national crisis” at the U.S.-Mexico border during his State of the Union address last week, President Trump ignored at least two issues that need to be addressed far more urgently.
One was climate change. No surprise there. Trump has fiddled while the Earth burned for the first two years of his presidency, and there’s no reason to expect a reversal of course. That will have to wait until his presidency ends in whatever way it does.
On the other issue, though, it’s not out of the realm of possibility that the bipartisanship the president touted in his speech could produce a deal that would alter the financial prospects of tens of millions of American workers and retirees — an expansion of Social Security, coupled with a series of gradual changes that would guarantee the solvency of the nation’s essential safety net program through the end of the century and beyond.
While campaigning for the presidency, Trump promised — unlike “every other Republican” — not to cut Social Security. Now he has a chance not only to do no harm, but to improve a program on which 63 million Americans, many of them Trump supporters, depend. It comes in the form of the Social Security 2100 Act, recently introduced in the House and Senate by newly empowered Democrats.
It contains an across-the-board increase in benefits equal to about 2 percent of the average Social Security benefit, which last year was $1,347 per month. The annual cost-of-living adjustment also would be raised to reflect the reality that seniors tend to use more of some kinds of services, such as health care. The minimum benefit would increase so that those who have worked at low wages for many years are less likely to live in poverty when they retire. And millions of middle-income people would see a reduction in federal income taxes on their benefits.
How would this be paid for? The payroll tax rate would rise over 24 years from 12.4 percent to 14.8 percent. And it would be imposed on earnings over $400,000 a year. This year, only income up to $132,900 is subject to the tax. If the proposed bill were in effect now, income between $132,900 and $400,000 would be exempt, creating a so-called doughnut hole.
This plan addresses two problems. One is that Social Security will soon be sending out more money than it takes in, depleting its trust funds for retirement and disability benefits by 2034 if no action is taken. At that point revenue would cover only about four-fifths of promised benefits. The pending legislation would allow Social Security to remain solvent — that is, able to pay all scheduled benefits on time — for 75 years, according to the program’s chief actuary, at which time, he projects, the financial condition of the program would be improving.
The second problem it tackles is growing ever more acute. Social Security was never meant to provide all retirement income. It was intended to be supplemented by company pensions and private savings. But these days pensions are going the way of the dinosaur for most workers, and because middle-class wages have remained essentially stagnant for the past 40 years, people are hard pressed to save, especially in light of the high costs of health care, education, housing and other essentials. So a boost in benefits is badly needed.
There are drawbacks to the bill as well. Some of the benefits would accrue to upper-income retirees who are already doing fine. It’s unclear that the proposed minimum benefit would be sufficient to actually keep people from falling into poverty. And workers would pay a gradually escalating payroll tax. The betting here is that younger workers would be amenable to paying a higher tax if they could be guaranteed that the program will be there for them when they retire. Because many are staggering under sky-high student loan debt, they are even more unlikely than today’s older workers to be able to salt away money in a 401(k) account. Nor will most have an employer-sponsored defined-benefit pension to rely on.
Trump often seems to think no further ahead than the next tweet, but this is one area where his instincts might be aligned with the best long-term interests of all Americans. Let’s hope he’s willing to make a deal to reinforce the essential retirement foundation that was laid during one of the New Deal’s finest hours.